Basically since the Robinhood crowd thinks about video games a lot as compared to boring companies that make industrial cleaning supplies or whatever makes GameStop stock more susceptible to these sorts of activities. And the short crowd despises B&M since it worships FAANG. Little did they know that video game demand is totally outrageous now and if there is supply it disappears immediately. Right now it doesn't matter if games are physical or digital or if the store is standalone or in a mall. Demand doesn't care. It wants product NOW because of the virus. It is not 2018 where Fortnite, Apex Legends and whatever other free downloads were hot at the expense of everything else except Switch. ALL video games are hot -- Atari to PS5. So hot that we are almost totally wiped out of games and systems since people are holding on to their old games like they're Faberge Eggs. Instead we are having to live off of Pokemon cards, DVDs, comics and Beanie Boos. Of course that will probably change by 2023, but it's where we are today.

The problem with GameStop in 2017-2019 is that half the store was $2.99. That was our problem too. The problem we didn't have that GameStop did is that we didn't have 5000 locations full of stuff that was $2.99. We had 2 locations and now we have one. Now those $2.99 games (besides sports) are worth $10 due to the secondary market deciding that used video games aren't worthless anymore.

43 minutes ago, GCrites80s said:

boring companies that make industrial cleaning supplies

 

Hey now.  Some of us distribute cleaning supplies.  We also print labels for Captain D's ranch dressing and are paid handsomely for our efforts. 

Do tech bros follow you? Do they know what a Captain D's is? You know Captain D's is hot in the Uncool Crescent, Circleville and West Virginia.

It isn't necessarily to do with the industry.  It has to do with the short interest in that particular stock.

 

Basically, by buying large numbers of long positions in a heavily shorted stock when most other long positions were held by institutions (which don't move at warp speed like hedge funds and private equity), they created a market in which (a) due to margin calls and similar trading rules, short sellers faced a legal obligation to buy the stock (b) from the very people who had just bought long positions in it specifically to squeeze those short sellers, and who now can refuse to sell until the price (in WSB vernacular) "hits the moon".

 

Of course, the WSB subredditors don't have control over each other and so this is an insane sociological experiment in collective action problem dynamics--real world game theory for incredible stakes, with the distributed anonymity of social media and attendant complete lack of enforcement mechanisms.

 

(1) Everyone knows GME is going to crash back to Earth at some point.  They've been hemorrhaging for years.  They might not go back to the brink of bankruptcy if demand for product stays high (and the short sellers are crushed, since massive short selling can itself become a self-fulfilling prophecy), but they're still not CAH.

 

(2) As long as almost none of the WSB longs sell, the tiny few who do are raking in massive gains.  In addition, until the tipping point, it's in all the longs' interest to hold or even buy more--then, when some tipping point is reached, it becomes in everyone's interest to bail at once so as to not be the last one still standing on the bubble when it bursts.

 

(3) Since I am not the only one who knows that, many WSB people are calling on each other to hold out, a kind of peer pressure in lieu of a more binding (and likely illegal) enforcement mechanism against the prisoner's dilemma.

 

(4) Other hedge funds may know this and be piling into new short positions at higher entry points.  Just because shorting GME at $10 turned out to be suicidal doesn't mean that shorting it at $250 would be, after all.  The evidence of this is that overall short interest in the company doesn't appear to be going down yet, even as we know that many shorts have been forced to cover.

 

(5) Since the WSB thesis is that the tipping point, the time to clear out, won't come until the short interest is much lower, the new shorts make it more likely that the longs hold longer, despite their lack of enforcement mechanism, because the collective buy-in to that thesis encourages voluntary compliance as long as the premises hold.

 

(6) The new shorts allow for additional long positions because shorting involves borrowing and selling the share to someone--which, of course, is most likely someone who wants to buy a long position.  In a market this crazy, more shorts make more longs possible.  Incidentally, there were some legendary instances of this dynamic in the lead-up to the 2008 crash (and the shorts that managed to hold on to the crash, of course, did very well, despite their travails in the meantime).

 

This is like a football game, except the offensive and defensive linemen each have rockets strapped to their backs to maximize their force at one another, and they're all wearing bomb vests instead of pads to try to scare the guy on the other side off. affecting complete confidence that they'll never get caught in any of the flames.

Just now, Gramarye said:

(1) Everyone knows GME is going to crash back to Earth at some point.  They've been hemorrhaging for years.  They might not go back to the brink of bankruptcy if demand for product stays high (and the short sellers are crushed, since massive short selling can itself become a self-fulfilling prophecy), but they're still not CAH.

 

It's funny you say that - because I was looking at put options into March for GME, and they're priced as if its an absolute certainty that the stock is going back to $5

Just now, YABO713 said:

 

It's funny you say that - because I was looking at put options into March for GME, and they're priced as if its an absolute certainty that the stock is going back to $5

 

Hah!  I was planning on looking at the prices of such options after the market opened today.  I had a feeling that might be what I'd find.

Gamestop doubled overnight to $300+/share.  

8 hours ago, GCrites80s said:

Do tech bros follow you? Do they know what a Captain D's is? You know Captain D's is hot in the Uncool Crescent, Circleville and West Virginia.

 

I control pricing on this company's website.  Do you want this case of mop heads for $7.97 instead of $79.73?  I can make it happen.  It's hard to believe that they allowed so much power to concentrate in one man's fingertips.  

 

 

 

Note the timestamp in the lower right.  9:50 a.m.  The market has been open for 20 minutes and the volume is more than double the 90-day average daily volume.  The float is 69,747,00.

 

At $300.57/share, GME is worth $21.0 billion.  For comparison, Fifth Third Bancorp (FITB) is worth $21.2B.  Huntington (HBAN) is $13.75B and Key (KEY) is worth $17.05B.

Nobody will care if GameStop executives sell shares right now, will they?

 

You would sell too if it happened toooo youuuuuu

BTW, this is national news now. Not national stock news, your grandma knows news. This is what I was talking about in eroding confidence in The Market. The Market is not pleased.

 

Just now, GCrites80s said:

BTW, this is national news now. Not national stock news, your grandma knows news. This is what I was talking about in eroding confidence in The Market. The Market is not pleased.

I'm not gonna shed any tears for the billionaires taking a hair cut here. 

In other news, TD Ameritrade and Robinhood both appeared to have crashed. 

4 minutes ago, GCrites80s said:

Nobody will care if GameStop executives sell shares right now, will they?

 

You would sell too if it happened toooo youuuuuu

 

No doubt lol - if I'm them I'm ditching all of it. Walk away with $90 million and pay $3 million in legal fees lol. 

19 hours ago, DarkandStormy said:

 

BLNK...is an EV stock though?

Yes, I worded this incorrectly (multitasking w/work), my bad ... I meant forget the vehicles but the charging stations.

1 minute ago, YABO713 said:

In other news, TD Ameritrade and Robinhood both appeared to have crashed. 

 

Rumor is that hedge funds and IBs are refusing to make markets until they can adjust their positions, and everything is crashing. 

5 minutes ago, GCrites80s said:

This is what I was talking about in eroding confidence in The Market. The Market is not pleased.

 

Oh no, the wrong people are manipulating the market!

17 minutes ago, Gramarye said:

 

Note the timestamp in the lower right.  9:50 a.m.  The market has been open for 20 minutes and the volume is more than double the 90-day average daily volume.  The float is 69,747,00.

 

At $300.57/share, GME is worth $21.0 billion.  For comparison, Fifth Third Bancorp (FITB) is worth $21.2B.  Huntington (HBAN) is $13.75B and Key (KEY) is worth $17.05B.

 

 

Do different outlets report volume differently?

15 hours ago, YABO713 said:

FWIW - The next two the WSB subreddit is pimping is Nokia and Blackberry. 

 

Those have already mooned.  Check out AMC as well.  It's like it's 2003 lol.

16 minutes ago, YABO713 said:

In other news, TD Ameritrade and Robinhood both appeared to have crashed. 

 

Yeah my tech bro brother just texted me that he can't sell.  

 

I have the desktop versions of Webull and Robinhood.  They're really confusing to use as compared to TD Ameritrade's desktop interface.  

10 minutes ago, DarkandStormy said:

 

 

Do different outlets report volume differently?

 

What average is that?  Fidelity specifically says 90-day.  Yours there might be 30-day?  Or 14-day?  Not sure.  That's my guess just based on general principle.  The volume for the past 7-30 days has definitely been pushing the average up.  The 90-day would be much lower than any more short-term average.

16 hours ago, RDB said:

There is more to this story than just Reddit pumping the stock. It’s more of Reddit having a positive sentiment because the stock was shorted so heavily. I think the stock was shorted at 130% of the float. It’s on a list of the most shorted stocks and the only one that has more shares shorted than available for sale. It’s ripe for the short squeeze that’s going on. I think Elon tweeting that is much less suspect than his private at $420 tweet.

 

I was joking a bit about Elon, though he did tweet out something a few weeks ago that caused people to buy an unrelated stock, which spiked.

 

 

The company Signal went public just after that tweet.  So, don't doubt the cult of Elon's power.

 

https://slate.com/technology/2021/01/gamestop-reddit-wallstreetbets-gme.html

 

Quote

Lots of investors tried to short-sell the stock. (How many investors have “long” and “short” positions is not difficult to figure out.) As of Monday, 71.2 million shares of GameStop stock involved a short position, per Bloomberg, more than the total amount of publicly tradable shares, something that’s only possible because not all shares of GME are available for purchase.

 

One group that noticed the shorts on the stock was r/WallStreetBets. The Wall Street speculation community has more than 2 million members, hundreds of thousands of whom are online at any given time, to say nothing of lurkers. In September, an enterprising subredditor had posted a seven-point treatise titled “Bankrupting Institutional Investors for Dummies, ft GameStop.” The subredditor noted the stock already had a significant short exposure (months before Cohen joined the board) and predicted that short sellers would be forced to abandon their positions and, in buying back their stocks, drive the price up. R/WallStreetBets users delighted in the idea and took it as a chance to egg one another on.

 

Quote

Whether for profit or ideological reasons, the Redditors are winning. They’ve bought the hell out of GME, and short sellers have begun to abandon their positions en masse, leading the stock to go up even more as they buy it back. It’s a classic short squeeze. Melvin Capital was down 15 percent for the year on Jan. 22, according to the Wall Street Journal, leading the fund to take a $2.75 billion rescue package from other rich investors. On that day alone, short sellers against GameStop lost $1.6 billion, financial analytics firm S3 Partners said.

 

It would appear, unless others are aware of something else going on, this is a Short Squeeze, noticed and accelerated by folks in the WSB subreddit.

Edited January 27, 20214 yr by DarkandStormy

I just checked and my TD Ameritrade desktop login is working fine.  

 

I think that we'll see new regulations after this.  Personally I'd like to see a $10 straight-up tax per sell/buy on the retail apps.  Not a capital gains tax but a transactional tax.  Canada charges 1% on all real estate sales.  Something like that, to discourage speculative activity.  

Just now, jmecklenborg said:

I just checked and my TD Ameritrade desktop login is working fine.  

 

I think that we'll see new regulations after this.  Personally I'd like to see a $10 straight-up tax per sell/buy on the retail apps.  Not a capital gains tax but a transactional tax.  Canada charges 1% on all real estate sales.  Something like that, to discourage speculative activity.  

 

It's going the opposite way.  Vanguard and many others have taken out their transactional fee/tax.  Robinhood just brought it to people's phones with one password unlock lol.

3 minutes ago, Gramarye said:

What average is that?  Fidelity specifically says 90-day.  Yours there might be 30-day?  Or 14-day?  Not sure.  That's my guess just based on general principle.  The volume for the past 7-30 days has definitely been pushing the average up.  The 90-day would be much lower than any more short-term average.

 

https://finance.yahoo.com/quote/GME?p=GME

 

https://www.cnbc.com/quotes/GME?qsearchterm=

 

11 minutes ago, DarkandStormy said:

 

It's going the opposite way.  Vanguard and many others have taken out their transactional fee/tax.  Robinhood just brought it to people's phones with one password unlock lol.

 

Yeah I'm suggesting a tax, not a fee that goes to the online brokerages.  

 

Short Interest in GME is still ~140% of the available float.  Short Squeeze continues.

^The problem is many people are now shorting at $350 and down.  So that will increase the amount shorted.  Also the shorts that have a few thousand shares that are institutions have a lot of money and know this will burst in a few days of this market silliness.  

  

I’ve been a long hold on another stock that is been highly active the past few weeks- GEVO.  I think it might pop i to the twenties today when Biden announces the climate change program. A founder of GEVO is on his science board and the company is implementing carbon-free renewable fuels. 

 

Similar occurrence with AMC right now.

I went big this morning.  

 

3 hours ago, jmecklenborg said:

 

Yeah I'm suggesting a tax, not a fee that goes to the online brokerages.  

 

That's extremely regressive. If I'm buying $500 worth of stock it's a much higher percentage of the transaction than somebody buying $10,000.

5 minutes ago, DEPACincy said:

 

That's extremely regressive. If I'm buying $500 worth of stock it's a much higher percentage of the transaction than somebody buying $10,000.

 

Yeah that's the point.  Mindless trading and speculative activity don't benefit society.  People are keeping almost no cash savings or even borrowing money right now because they're playing in the market.  We've got tens of thousands of dudes being unproductive at work today because they're watching the travels and travails of Gamestock.  

 

 

 

12 minutes ago, jmecklenborg said:

 

Yeah that's the point.  Mindless trading and speculative activity don't benefit society.  People are keeping almost no cash savings or even borrowing money right now because they're playing in the market.  We've got tens of thousands of dudes being unproductive at work today because they're watching the travels and travails of Gamestock.  

 

 

 

Short selling billionaires don't benefit society either  

18 minutes ago, jmecklenborg said:

Yeah that's the point.  Mindless trading and speculative activity don't benefit society.  People are keeping almost no cash savings or even borrowing money right now because they're playing in the market.  We've got tens of thousands of dudes being unproductive at work today because they're watching the travels and travails of Gamestock.  

 

This is super subjective.  Sounds like you want to control people's behavior and what they do with their money?  Weird.

1 hour ago, DEPACincy said:

 

That's extremely regressive. If I'm buying $500 worth of stock it's a much higher percentage of the transaction than somebody buying $10,000.

You could charge a fee on margin trading to deter short sales, but again that would be regressive in the sense it would hit the smaller transaction much more than the larger one and would not likely effect large institutional players.  Otherwise, they could really get strict on allowing non-accredited investors to play in this type of market which would take a lot of the day traders out of the market.

However, at the same time, it could raise money to provide some type of insurance against companies like Gamestop that could suffer financial hits from this type of wild speculation.

 

I dont know a good answer, but I would imagine that if new regulation comes from this it will come on the margin traders. 

2 minutes ago, Brutus_buckeye said:

You could charge a fee on margin trading to deter short sales, but again that would be regressive in the sense it would hit the smaller transaction much more than the larger one and would not likely effect large institutional players.  Otherwise, they could really get strict on allowing non-accredited investors to play in this type of market which would take a lot of the day traders out of the market.

 

 

That wouldn't have helped in the GameStop example though. The company shorting it would certainly qualify as accredited, sophisticated investors while the individuals that bought it and raised the price were doing ordinary buys.

49 minutes ago, DarkandStormy said:

 

This is super subjective.  Sounds like you want to control people's behavior and what they do with their money?  Weird.

 

FWIW - I'll share my anecdote:

 

I hitched my wagon to NOK two days ago - and bought a lot of call options at $5

 

I'm not wealthy - but I'm blessed enough to have a job that pays me very well to practice law. Having said that, I still have $74,000 in student debt. Beyond that, my dad has surgery on Monday on his tongue for perinerual spread of a tumor that had been removed on his tongue. He'll be out of work for 4 months minimum, and will have to use all of his sick time because (as of now) he does not qualify for FMLA. (Because he's 64 and previously had cancer and took 5 weeks off work in late March to mid-May because he was very high risk for Covid. 

 

My mom owns a small business that constantly requires capital to continue to grow - as such, she and my dad have relied primarily on my dad's income for mortgage, groceries, etc. I plan on selling the rest of my NOK tomorrow and have already sold enough to ensure my profit. If NOK holds steady or increases tomorrow, I will be able to pay down 10% of my student loans (if I so choose - though I may reinvest in a less YOLO fashion), and I can pull 2-3 months of living expenses for my parents, just in case my dad's recovery takes longer than expected. 

 

In sum: I'm not sure that this is a net benefit for society, as I think a lot of unsophisticated investors might lose everything on a whim. But to say this hasn't become an equitable moment for retail investors like myself, isn't entirely true - at least in my case. 

15 minutes ago, Brutus_buckeye said:

You could charge a fee on margin trading to deter short sales, but again that would be regressive in the sense it would hit the smaller transaction much more than the larger one and would not likely effect large institutional players.  Otherwise, they could really get strict on allowing non-accredited investors to play in this type of market which would take a lot of the day traders out of the market.

However, at the same time, it could raise money to provide some type of insurance against companies like Gamestop that could suffer financial hits from this type of wild speculation.

 

I dont know a good answer, but I would imagine that if new regulation comes from this it will come on the margin traders. 

 

Margin for retail investors typically caps at 50% of underlying assets.  I'm pretty sure that's still the limit in my Fidelity account.

 

Bear Stearns was able to go to 50 times underlying assets.  If you want to talk about restricting margin across the board, I'm all for it.  But if form holds, those who can afford lobbyists will always lobby for a legislative advantage over those who can't--the new rules will hit retail investors.  It'll be justified by some BS about how the grown-ups shouldn't let the kids play with fire, whereas it's more like the casino owners don't want anyone else to be able to rig the game.

 

Nokia just traded 20x its average volume today.

I'm noticing an early 2000s theme here.

The social media element of this GME story is a modern twist, to the point where memes are actually marketing for the rally.

 

Like, for example ...

 

18 hours ago, GCrites80s said:

 

That wouldn't have helped in the GameStop example though. The company shorting it would certainly qualify as accredited, sophisticated investors while the individuals that bought it and raised the price were doing ordinary buys.

Personally,  I dont think anything needs to be done to regulate this. The market is efficient and will correct itself. Yes, there are a lot of short sellers who are taking it on the chin right now, especially institutional investors. It sucks for them but at the same time there is inherent risk built into things.  This is a new phenomenon that was probably not foreseen when the short sellers took the initial risk. Now, these risks are going to be priced into the market when short sellers make the bet. 
 

I have no sympathy toward the short sellers, but I also think if they want to play that game, they should be allowed to do so. The market will price in the risk

3 minutes ago, Brutus_buckeye said:

Personally,  I dont think anything needs to be done to regulate this. The market is efficient and will correct itself. Yes, there are a lot of short sellers who are taking it on the chin right now, especially institutional investors. It sucks for them but at the same time there is inherent risk built into things.  This is a new phenomenon that was probably not foreseen when the short sellers took the initial risk. Now, these risks are going to be priced into the market when short sellers make the bet. 
 

I have no sympathy toward the short sellers, but I also think if they want to play that game, they should be allowed to do so. The market will price in the risk

Also this should’ve (and was by a few people on Reddit in 2019/2020) been completely foreseen with the amount of shares sold short. It happened before when VW briefly became the most valuable company in the world in 2008.

The inevitable class action against Robinhood is probably going to bankrupt the platform. This is wild. 

11 minutes ago, YABO713 said:

The inevitable class action against Robinhood is probably going to bankrupt the platform. This is wild. 

Which is sad because nothing really has to happen and the market will inherently correct itself in due time as it learns to accommodate such risk. Then, these games will no longer be successful.

8 minutes ago, Brutus_buckeye said:

Which is sad because nothing really has to happen and the market will inherently correct itself in due time as it learns to accommodate such risk. Then, these games will no longer be successful.

 

In this specific instance, though, the entire strategy was to accumulate a position against the funds' shorts, which expire tomorrow, and then go for the ride as the funds were forced to purchase the float to offset their losses. 

34 minutes ago, Brutus_buckeye said:

Personally,  I dont think anything needs to be done to regulate this. The market is efficient and will correct itself.

 

If anything, they ought to have regulated pile-on short-selling years ago.

 

If we can't make this kind of voodoo-vulture folderol illegal (where hedge funds use leverage to add even more phantom vultures to the swarm already circling a struggling company), I can at least applaud people who for at least for one fleeting minute made it unprofitable (a far greater deterrent to Wall Street than making it illegal).

 

The sad part is that of course the mania will dissipate and some regular people who held on too long will be left holding the bag.

 

This is my favorite article on the surge that I've read so far: https://nymag.com/intelligencer/2021/01/reddit-gamestop-share-price-explained-wallstreetbets-melvin-capital.html.  It includes a rational discussion of the downside here:

 

Quote

 

This said, it is far from clear how progressive the ultimate redistribution of wealth from the GameStop craze will be. Eventually, this stock will come crashing down to Earth, and when it does, it will make many ordinary people who got caught up in the mania significantly poorer. When psychologically fragile people suddenly lose large sums of money — or what they believe to be large sums of money — they sometimes kill themselves. And nine months into the COVID pandemic, there are quite a lot of psychologically vulnerable people spending too much time on Reddit.

 

Another less-than-populist aspect of this drama is that the hedge fund that’s been hardest hit — Melvin Capital — did not become the favored target of WallStreetBets on account of its unique avarice or unscrupulousness, but rather, its exceptional transparency ...

 

Thus, for Wall Street, the upshot of all this is going to be: Never let regulators or the public know what your short positions are. Which doesn’t seem like a huge win for “the 99 percent.”

 

 

Guess the "free market" was only free until the billionaires and hedge funds started to lose money.